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Transcript of Equity Research Report Siri
NYU-POLY Research Report This report is published for educational purposes only
by students competing in the
Equity Research report competition.
Important disclosures appear at the back of this report NYU-Poly Equity Research Report Competition
Ticker: SIRI Recommendation: BUY
Price: $1.1775 Price Target: $2.075
Earnings/Share
Mar. Jun. Sept. Dec. Year P/E Ratio
2008A $N/A $N/A $N/A $N/A $N/A N/Ax
2009A N/A N/A N/A N/A N/A N/A
2010E 0.116 0.155 0.206 0.309 0.786 1.78
2011E 0.374 0.439 0.527 0.75 2.09 2.39
Highlights
Valuation: We are initiating coverage of Sirius XM Radio with a buy rating and a twelve month
price target of $2.075.
Strengthened financial situation : Due to its strong cash position, strong first quarter subscriber
growth and the improving outlook for the economy, Sirius XM will redeem all of its outstanding
10% Senior PIK Secured Notes due 2011 a year ahead of schedule, which in turn will reduce
interest expense and increase free cash flow.
Growing client base: Sirius XM adds over 171,000 net subscribers in the first quarter of 2010,
ended with 18,944,199 subscribers, an increase of 344,765 over the year ago quarter. At the same
time, its average revenue per user increased by 2.0%-from $10.56 to $10.73. We believe that many
of the new client accounts that being added and increased average revenue per user have the
potential to be scaled up to approximately 1800 million dollars in annual revenue and will help
Sirius XM grow aggressively.
Improved competitive landscape: With more programs broadcasted such as „Doctor Radio
Reports: Understanding Autism' and free Sirius XM app added to Android-powered Smartphone,
the company is winning an edge to attract more customers.
Sirius XM Radio Inc.
May 2, 2010
Jiamian Yang
Email:jyang01@stude
nts.poly.edu
Industry: Radio Broadcasting
52 Week Price Range $0.3-$1.22
Average Daily Volume 160.97million
Beta 2.07
Dividend Yield (Estimated) N/A
Shares Outstanding 3.88 B
Market Capitalization 4.57 B
Institutional Holdings 2%
Insider Holdings 22%
Book Value per Share(04/30/2010) $0.01
Debt to Total Capital 89%
Return on Equity -1491%
Market Profile
NYU-Poly Equity Trading Club May 2nd
2010
2
Business Description
Sirius XM Radio, Inc. is the world‟s largest pure-play audio entertainment company. Incorporated on May 17, 1990, it has two
subsidiaries, XM Satellite Radio Holdings Inc. and Satellite CD Radio Inc. Although the National Association of Broadcasters (NAB) and
the Consumer Coalition for Competition in Satellite Radio contended that if merged, the company would be a monopoly, which result in
lessening competition and innovation substantially, the two companies still merged on February 19, 2007, bringing the combined company
a total of more than 18.5 million subscribers based on current subscriber numbers on the date of merging.
After merger, the new company spent more money to develop new products with only one company to develop products for. So far,
services have been broadened to broadcasting music, sports, news, talk, entertainment, traffic and weather channels in the United States
which were not even conceived of when satellite radio was launched. The proprietary satellite radio systems - the SIRIUS system and the
XM system are used to broadcast those channels. The SIRIUS system consists of four in-orbit satellites, over 125 terrestrial repeaters that
receive and retransmit signals, satellite uplink facilities and studios. The XM system consists of four in-orbit satellites, over 650 terrestrial
repeaters that receive and retransmit signals, satellite uplink facilities and studios. Subscribers can also receive certain of music and other
channels over the internet, including through an application on the Apple iPhone.
As of December 31, 2009, Sirius XM Radio, Inc. had 18,772,758 subscribers.
Business Segments
The company generates its revenue in four segments.
• Subscription fees and activation fees with most of customers subscribing on annual, semiannual, quarterly or monthly basis.
• Advertising on select non-music channels
• Direct sale of home units that offer satellite services to home and commercial audio systems and products that provide access to the
internet radio services in the home without the personal computer.
• Other ancillary services offered by the company include SIRIUS Backseat TV, Sirius Travel Link, Real-Time Traffic services and
real-time weather services.
Figure 1: Revenue Breakdown
Figure 2: Annual Revenue by Business Segment
NYU-Poly Equity Research Report Competition 3
From figure1 and 2, we can see that the subscription fees are the primary resource which account for more than 75% of total revenue. The
subscription fees are increasing for successive three year in accordance with total revenue while there are no substantial changes for other
resources of revenue.
Industry Overview
Key Industry Figures 2009
Industry Revenue 15,287.3M
Revenue Growth -17.9%
Industry Gross Product 5,562.4
Number of Establishments 6,412
Number of Enterprises 2,937
Employment 105,793
Figure 3: Industry Statistics
Major Player Market
Cap(Billion)
CC Media Holdings Inc.
The parent company of Clear Channel 0.55989
Sirius XM Radio Inc. 4.57
CBS Corporation 10.967
Other Companies 0.71829
Figure 4: Key Competitors in the Industry
The Radio broadcast industry is a small industry worth less than 17 million dollars. It is highly concentrated, with the biggest player, CBS
Corporation, accounting for 65.49% of the market. The key industry statistics is provided as following. Sirius currently has a market
capitalization of $4.50 billion which places the company in the mid cap ranges, falling short in market cap compared to CBS. As the leader
of market cap, CBS has the largest company size in the industry of $10.967 billion, placing the company in the large market cap market.
Sirius XM, CBS and CC Media all dwarf the other companies in the industry who together have a market cap of $718.29 million which
places them in the small market cap scale.
Major Competitors Despite the fact that Sirius XM becomes the only provider of radio services via satellite after a merger on February 2007, it still faces
competition from other program sources.
NYU-Poly Equity Research Report Competition 4
• Traditional Radio. Unlike satellite radio, traditional AM/FM radio has had a well established demand for its services and offers
free broadcasts paid for by commercial advertising rather than by a subscription fee. Some AM/FM radio stations have reduced
the number of commercials, expanded range of music played on the air to lure customers away from satellite radio.
• HD Radio. Many radio stations have begun broadcasting digital signals, which is similar to satellite signals. These stations do not
charge a subscription fee for their digital signals but do generally carry advertising. To the extent that traditional radio stations
adopt signal transmission technology, any competitive advantage that satellite radio enjoy over traditional one because of clearer
digital signal would be lessened. Approximately 15 automakers have committed to installing HD radio equipment as either a
factory standard or factory option.
• Internet Radio. Internet radio broadcasts have no geographic limitations and can provide listeners with radio programming. Major
media companies and online providers, including Clear Channel, CBS, Pandora, Lost.fm and slacker, make high fidelity digital
streams available through the internet for free or for little fee. In addition, there has been wide proliferation of mobile internet
enabled Smartphone, many of which have the capability of interfacing with vehicles. These Smartphone can play recorded or
cached content and access live internet radio via application or browsers. The past few years have seen a steady increase in the
audio quality of internet radio streams and in the amount of audio content available via the Web, resulting in a steady increase in
internet radio audience metrics. The improvements from higher bandwidths and wider programming selection are likely to
continue making internet radio an increasingly significant competitor in the near future.
• Portable Audio Devices. Portable audio devices are portable digital music player that allow users to download and purchase music
online like Apple iPod and Google Nexus. They are compatible with certain car stereos and home speaker systems. Certain
automakers have entered into arrangements with manufacturers of portable media players.
• Direct Broadcast Satellite and Cable Audio. Some companies provide audio services through either direct broadcast satellite or
cable audio systems. There services are targeted to fixed locations. The radio services provided is often included as part of a
package of digital services with video service. And customers generally do not pay additional charge for the audio service.
• Traffic News Services. Clear Channel and Tele Atlas deliver nationwide traffic and travel information to drivers.
Competitive Positioning (SWOT Analysis)
Strength
Extensive choices and customized programming: Sirius XM offers a dynamic programming lineup of more than 135 channels of
commercial-free music, sports, news, talk, entertainment, and traffic and weather on it platform. The “Best of SIRIUS” package offers to
XM subscribers the Howard Stern channels, Martha Stewart Living Radio, SIRIUS NFL Radio, SIRIUS NASCAR Radio, Playboy Radio
and play-by-play NFL games and college sports programming while the “Best of XM” package offers to SIRIUS subscribers Oprah Radio,
The Virus, XM Public Radio, MLB Home Plate, NHL Home Ice, The PGA, Tour Network, and select play-by-play of NBA and NHL
games and college sports programming. Listeners are also allowed to customize and enhance standard programming lineup. The competitor
NYU-Poly Equity Research Report Competition 5
ClearChannel Communications offers I love Radio, an application that offers all of ClearChannel's radio stations which includes news, live
talk radio, and music. But it doesn't provide customized service. Competitors Pandora and Slacker do track the listeners' preferences and
tailor the music based on the listeners' tastes. Nevertheless, they do not offer news, talk programs or live DJ's.
Deep penetration into automakers: Sirius XM have agreements with almost every major automaker — Acura/Honda, Aston Martin,
Audi, Automobile Lamborghini, Bentley, BMW, Chrysler, Dodge, Ferrari, Ford, General Motors, Honda, Hyundai, Infiniti/Nissan, Jaguar,
Jeep, Kia, Land Rover, Lincoln, Lexus, Toyota, Mazda, Mercedes-Benz, Mercury, MINI, Mitsubishi, Porsche, Rolls-Royce, Volvo and
Volkswagen — to offer satellite radios as factory or dealer-installed equipment in their vehicles. As of December 31, 2009, satellite radios
were available as a factory or dealer-installed option in substantially all vehicle models sold in the United States, which is definitely an
advantage over all its competitors.
Multi access to service: Sirius XM‟s service can be accessed by internet, radio and Smartphone while competitors like Pandora, lost.fm‟s
service can only be retrieved by either internet or Smartphone.
Weakness
Competitors like Pandora and lost.fm provide free service to their customers. People‟s iPhone can get Pandora for fee anywhere and do not
have to pay for the monthly charge. People also build up databases of music on their own computer. There is really little need for younger
generation to have a paid service to get music.
Another weakness Sirius XM radio has is that it is heavily dependent on its third-party partners. Partnership with automakers which
actually is a strength contributes to the major revenue of Sirius XM Radio. But it can also turn into poison sometimes. If any of these
partnerships were to fail, the company would find it difficult to survive.
Opportunity
Exploring new ways to distribute satellite radio to their customers is one way that set the company apart from competitors. Usually in the
broadcast industry this comes in the form of partnerships. For example, Sirius XM has partnered with Dish Network satellite TV, allowing
Dish subscribers to access Sirius XM‟ programming through their television set.
Another area of opportunity would be in the product line and programming offered by the company. Is there a product that allows them to
access satellite radio wherever they want to go? For example, Sirius XM released a “walkman” like satellite radio with a hefty price tag.
Lastly, what are people listening to? Sirius XM signed America‟s most controversial talk show host, Howard Stern. Because love him or
hate him, this is sure to be a strong seller for the company.
Another opportunity for Sirius XM lies in the pre-owned market which opens up an entirely new channel of customers. As of year-end
2009, there were approximately 27 million satellite radios installed in cars, with only 11.6 million that were active. Imagine how much
revenue could generate if Sirius XM can remarket to non-subscribers with the device already in their cars.
Threats
The company is facing the threat of losing subscriber base. It has a churn rate of 2.00% which is actually very high. Direct TV has a churn
rate of 1.5%, AT&T 1.4%. Sirius XM Radio‟s is higher than those companies which make them los a lot of subscriber base.
Nature may be the biggest threat. Having satellites in space is extremely costly Storms and disruptions in space threaten to shutdown the
company, and imply a huge maintenance cost when something is wrong? It is costly to insure problems in space?
Costly operation, expenses, and possible technological failure, threaten the company‟s outlook. Subscribers and consumers may be turned
off to this industry, meaning Sirius XM has to spend a great deal in advertising and marketing to emphasize the product as positive and
worthwhile. However, rapid technological advances could make satellite radio service incompetent anytime.
Financial Analysis Despite economic headwinds and a devastated auto industry, the company‟s 2009 financial results are impressive.
Earnings Analysis and Projection
Sirius XM is the only major U.S. radio company to grow revenues in the last year. The total revenue increased from $1663,992 to
$2472,638.The total revenue is composed of subscriber revenue, advertising revenue, equipment revenue and other revenue. we see an
increase of 48% in subscriber revenue due to merger effect and the sale of "best of programming", an increase of 10% in advertising
revenue due to inclusion of XM revenue from merger, decrease of 10% in equipment revenue due to decrease in sales through direct to
consumer distribution channel and low product royalties, increase of 599% in other revenue due to the introduction of the U.S Music
Royalty Fee and the inclusion of XM revenue for a full year.
Over the next few years, we project Sirius XM's revenue to grow driven by increasing subscriber number and improving economy.
Cash Flow Analysis
NYU-Poly Equity Research Report Competition 6
2009 2008 2007 2009vs. 2008 2008 vs. 2007
Net cash provided by operating
activities
433,830 (152,797) (148,766) 586,627 (4,031)
Net cash provided by investing
activities
(248,511) 728,425 (54,186) (976,936) 782,611
Net cash provided by financing
activities
(182,276) (634,002) 248,351 451,726 (882,353)
Net increase in cash and cash
equivalents
3,043 (58,374) 45,399 61,417 (103,773)
Cash and cash equivalents at
beginning of period
380,006 438,820 393,421 (58,374) 45,399
Cash and cash equivalents at end
of period
383,489 380,446 438,820 3,043 (58,374)
Figure 4: Cash Flow in $ thousands
Sirius XM achieved over $185 million in free cash flow for 2009, also the first year of free cash flow- a dramatic increase compared to a
negative free cash flow in 2008
Balance Sheet Analysis
Figure 5: Balance Sheet Data ( in $ thousands)
2009
Cash and cash equivalents 383,489
Restricted investments 3,400
Total assets 7,263,528
Long-term debt, net of current portion 3,062,693
Stockholders’ equity (37,432)
Figure 6: Debt Principal and Interest due
The debt load the company has right now is too heavy. As of December 31, 2009, the company had an aggregate principal amount of
approximately $3.1 billion of indebtedness on their balance sheets. That translates to $214 million interest expense for 2010 and $308
million for 2011. The company has rolled them to the future, but the interest cost is till there. And eventually the company has to deal with
that debt load.
Valuation
Discounted Cash flow Model Analysis: Using a three-stage FSEF model in which free cash flows grow at 21% for the first year, slow to
15% growth over a four-year period, and stabilize at 2.5% subsequently, we arrived a valuation of $2.47 using Damodaran's spreadsheet.
The cost of equity used in the model is derived from the capital asset pricing model with the key assumptions as follows:
-Risk-free rate: 3.65%
- Market Premium: 6%
- Beta: 1.95
NYU-Poly Equity Research Report Competition 7
Comparable Company Analysis: While Sirius has no competitors that directly replicate its business model, we find a combination of CBS
and CC Media as sufficient comparisons. CBS is currently at an EV-to-EBITDA multiple of 9.45, and CC Media share is at 13.63x.
Applying weights based on revenue mix, we arrive at an EBITDA multiple of 9.45. Based on our estimate of 2010 EBITDA of $690.4
million, we forecast price per share of $1.68 for the coming 12 months.
By blending the two target price with equal weight, we arrive at a price target of $ 2.075, which implies that the stock is undervalued at its
current level.
Investment Risks
Heavy debt
As of December 31, 2009, the company had an aggregate principal amount of approximately $3.1 billion of indebtedness. A substantial
portion of cash flows from operations is dedicated to the payment of principal and interest on its indebtedness which could adversely affect
its ability to raise additional capital to fund operations and could limit its ability to react to changes in the economy or industry.
Business too dependent on automakers
The sale of lease of vehicles with satellite radios is an important source of subscribers for Sirius service while subscription fee account for
more than 80% of its total revenue. So the subscription growth is dependent in large part on sales and vehicle production by automakers.
Unfortunately, a number of automakers have experienced a sharp decline in sales, have reduced production and are experiencing extreme
financial difficulties. If the vehicle sales continue to decline or the penetration of satellite radios in those vehicles reduce and there is no
offsetting growth in both of areas, subscriber growth for Sirius‟s satellite radio services will be adversely impacted.
Technology renovation
The audio entertainment industry is featured with frequent innovations, rapid change and evolving standards. Incapable of keep pace with
these changes will make the company less competitive in the market.
Failure of satellites
The company is currently operating eight satellites, four supporting the Sirius service and four supporting XM service. But the business
could be significantly damaged if the useful life of its satellites is shorter than expected, whether as a result of a satellite failure or technical
obsolescence and Sirius does not launch replacements in a timely manner.
.
Investment Thesis
Sirius XM is the only provider of radio services via satellite. It generates revenue from four businesses sectors: subscription fee, advertising,
equipment sales and other businesses. The total revenue increased from $1663,992 at the end of 2008 to $2472,638 at the end of 2009.
Delivering Sirius XM app for Smartphone and tapping pre-owned market further fuel the growth over a five-year period. However, heavy
dependence on its third-party partners to generates revenue increase its risk profile. If any of partnerships were to fail, the company would
be in difficult situation.
Despite economic headwinds and a devastated auto industry in past two years, Sirius XM has managed the auto industry crisis, which
threatened its ability to gain new subscribers and overcame a mountain of debt through refinancing and a deal with cable pioneer John
Malone that gave his Liberty Media a 40% percent equity stake.
Balance sheet metrics is also improving. The new addition of 171,000 subscribers for the first quarter of 2010, benefiting from better car
sales and users signing after free trial left the Company in much greater financial health. Cash levels have increased from negative at the
end of 2008 to $3,043 million at the end of 2009. All these shook off the threat of a Nasdaq delisting. Finally, $113,685 million of 10%
Senior PIK Secured Notes due 2011 will be redeemed ahead of schedule on June 1, which will decrease a large portion of financing costs
for the company.
Despite these positive fundamentals, Sirius is currently trading at a discount which is supported by our comparable company analysis and
our DCF model. Both point to a higher valuation than the current market price. The current price to sales per share ratio of 1.88x is also
well below its normal historic range from 86.42x to 12.24x, which justify a premium valuation for it.
Based on our above analysis, we believe that the stock is undervalued and has room on the upside. We have a 12 month target price of
$2.075. We recommend a BUY.
NYU-Poly Equity Research Report Competition 8
Figure 1: Income Statement $ in millions Source: Company Documents, Student Estimates
SIRIUS XM RADIO INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31,
(in thousands, except per share
data) 2009 2008 2007
Revenue:
Subscriber revenue, including
effects of rebates 2,287,503 1,548,919 854,933
Advertising revenue, net of agency
fees 51,754 47,190 34,192
Equipment revenue 50,352 56,001 29,281
Other revenue 83,029 11,882 3,660
Total revenue 2,472,638 1,663,992 922,066
Operating expenses (depreciation and amortization shown separately below) (1):
Cost of services:
Satellite and transmission 84,033 59,279 27,907
Programming and content 308,121 312,189 236,059
Revenue share and royalties 397,210 280,852 146,715
Customer service and billing 234,456 165,036 93,817
Cost of equipment 40,188 46,091 35,817
Sales and marketing 228,956 231,937 183,213
Subscriber acquisition costs 340,506 371,343 407,642
General and administrative 227,554 213,142 155,863
Engineering, design and
development 41,031 40,496 41,343
Impairment of goodwill _ 4,776,190 _
Depreciation and amortization 309,450 203,752 106,780
Restructuring, impairments and
related costs 32,807 10,434 _
Total operating expenses 2,244,312 6,700,741 1,435,156
Income (loss) from operations 228,326 (5036,749) (513,090)
Other income (expense):
Interest and investment income 3,645 9,079 20,570
Interest expense, net of amounts
capitalized (306,420) (144,833) (70,328)
Loss on extinguishment of debt and
credit facilities, net (267,646) (98,203) _
Gain (loss) on investments 1,931 (30,507) _
Other income (expense) 3,355 (9,599) 31
Total other expense (565,135) (274,063) (49,727)
Loss before income taxes (336,809) (5,310,812) (562,817)
Income tax expense (5,981) (2,476) (2,435)
NYU-Poly Equity Research Report Competition 9
Net loss (342,790) (5,313,288) (565,252)
Preferred stock beneficial
conversion feature (186,188) _ _
Net loss attributable to common
stockholders (528,978) (5,313,288) (565,252)
Net loss per common share (basic
and diluted) (0.15) (2.45) (0.39)
Weighted average common shares
outstanding (basic and diluted) 3,585,864 2,169,489 1,462,967
(1) Amounts related to share-based payment expense included in operating expenses were as follows:
Satellite and transmission 2,745 4,236 2,198
Programming and content 9,064 12,148 9,643
Customer service and billing 2,051 1,920 708
Sales and marketing 9,608 13,541 15,607
Subscriber acquisition costs _ 14 2,843
General and administrative 45,634 49,354 44,317
Engineering, design and
development 4,879 6,192 3,584
Total share-based payment expense 73,981 87,405 78,900
NYU-Poly Equity Research Report Competition 10
Figure 2: Balance Sheet $ in millions Source: Company Documents, Student Estimates
SIRIUS XM RADIO INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
As of December 31,
(in thousands, except share and per share data) 2009 2008 2007
ASSETS
Current assets:
Cash and cash equivalents 383,489 380,446 438,820
Accounts receivable, net 113,580 102,024 44,068
Receivables from distributors 48,738 45,950 60,004
Inventory, net 16,193 24,462 29,537
Prepaid expenses 100,273 67,203 31,392
Related party current assets 106,247 110,427 2,161
Deferred tax asset 72,640 31,270 35,000
Other current assets 18,620 27,474 37,875
Total current assets 859,780 789,256 678,857
Property and equipment, net 1,711,003 1,703,476 806,263
FCC licenses 2,083,654 2083,654 83,654
Restricted investments 3,400 141,250 18,000
Deferred financing fees, net 8,902 9,197 13,864
Intangible assets, net 611,461 688,671 -
Goodwill 1,834,856 1,834,856 -
Related party long-term assets 110,594 128,357 3,237
Other long-term assets 39,878 81,019 90,274
Total assets 7,263,528 7,459,736 1,694,149
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses 543,686 625,264 464,943
Accrued interest 74,566 76,463 24,772
Current portion of deferred revenue 1,086,205 1,002,736 548,330
Current portion of deferred credit on executory
contracts
252,831 234,774 -
Current maturities of long-term debt 13,882 399,726 33,801
NYU-Poly Equity Research Report Competition 11
Accumulated deficit (10,241,238) (9,712,260) (4,398,972)
Total stockholders’ equity 37,432 8,537 (792,737)
Total liabilities and stockholders’ equity 7,263,528 7,459,736 1,694,149
Related party current liabilities 105,471 68,373 1,148
Total current liabilities 2,076,641 2,407,336 1,074,994
Deferred revenue 283,942 247,889 110,525
Deferred credit on executory contracts 784,078 1,037,190 _
Long-term debt 2,799,127 2,820,781 1,278,617
Long-term related party debt 263,566 _ _
Deferred tax liability 940,182 894,453 12,771
Related party long-term liabilities 17,508 _ _
Other long-term liabilities 61,052 43,550 9,979
Total liabilities 7,226,096 7,451,199 2,486,886
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, par value $0.001; 50,000,000
authorized at December 31, 2009 and 2008
Series A convertible preferred stock
(liquidation preference of $51,370 at
December 31, 2009 and 2008); 24,808,959
shares issued and outstanding at December 31,
2009 and 2008
25 25 _
Convertible perpetual preferred stock, series B
(liquidation preference of $13 and $0
at December 31, 2009 and 2008, respectively);
12,500,000 and zero shares issued
13 _
Convertible preferred stock, series C junior; no
shares issued and outstanding at December 31,
2009 and 2008
_ _
Common stock, par value $0.001;
9,000,000,000 and 8,000,000,000 shares
authorized
at December 31, 2009 and 2008, respectively;
3,882,659,087 and 3,651,765,837
3882 3652 1,471
Accumulated other comprehensive loss, net of
tax
(6581) (7871) _
Additional paid-in capital 10,281,331 9,724,991 3,604,764
NYU-Poly Equity Research Report Competition 12
Figure 2: Statement of Cash Flows $ in millions Source: Company Documents, Student Estimates
SIRIUS XM RADIO INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
(in thousands) 2009 2008 2007
Cash flows from operating
activities: $ (342,790) $ (5,313,288) $ (565,252 )
Net loss Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 309,450 203,752 106,780
Impairment of goodwill _ 4,766,190 _
Non-cash interest expense, net of
amortization of premium 33,818 (6,311) 4,269
Provision for doubtful accounts
30,602 30,602 21,589 9,002
Amortization of deferred income
related to equity method investment (2,776) (1,156) _
Loss on extinguishment of debt and
credit facilities, net 267,646 98,203 _
Restructuring, impairments and
related costs 26,964 _ _
Loss (gain) on disposal of assets _ 4,879 (428)
Loss on investments 13,664 28,999 _
Share-based payment expense 73,981 87,405 78,900
Deferred income taxes 5,981 2,476 2,435
Other non-cash purchase price
adjustments (202,054) (68,330) _
Other Changes in operating assets
and liabilities: _ 1,643 _
Accounts receivable (42,158) (32,121) (28,881)
Inventory 8,269 8,291 4,965
Receivables from distributors (2,788) 14,401 (13,179)
Related party assets 15,305 (22,249) (1,241)
Prepaid expenses and other current
assets 10,027 (19,953) 11,118
Other long-term assets 86,674 (5,590) 13,691
Accounts payable and accrued expense (46,645) (83,037) 52,492
Accrued interest 2,429 23,081 (8,920)
Deferred revenue 89,144 73,334 183,582
Related party liabilities 54,606 34,646 _
Other long-term liabilities 44,481 30,249 1,901
Net cash provided by (used in)
operating activities 433,830 (152,797) (148,766)
Cash flows from investing activities:
Additions to property and equipment (248,511) (130,551) (65,264)
Sales of property and equipment _ 105 641
Purchases of restricted and other
investments _ (3000) (310)
NYU-Poly Equity Research Report Competition 13
Acquisition of acquired entity cash _ 819,521 _
Merger related costs _ (23,519) (29,444)
Net cash (used in) provided by
investing activities (248,511) 728,425 (54,186)
Cash flows from financing activities:
Proceeds from exercise of warrants and
stock options _ 471 4,097
Preferred stock issuance costs, net of
costs (3,712) _ _
Long-term borrowings, net of costs 582,612 531,743 244,879
Related party long-term borrowings, net
of costs 362,593 _ _
Payment of premiums on redemption of
debt (17,075) (18,693) _
Payments to noncontrolling interest _ (61,880) _
Repayment of long-term borrowings (755,447) (1,085,643) (625)
Repayment of related party long-term
borrowings (351,247) _ _
Net cash (used in) provided by
financing activities (182,276) (634,002) 248,351
Net increase (decrease) in cash and cash
equivalents 3,043 (58,374) 45,399
Cash and cash equivalents at beginning
of period 380,446 438,820 393,421
Cash and cash equivalents at end of
period 383,489 380,446 438,820
NYU-Poly Equity Research Report Competition 14
Disclosures:
Ownership and material conflicts of interest:
The author(s), or a member of their household, of this report holds a financial interest in the securities of this company.
The author(s), or a member of their household, of this report knows of the existence of any conflicts of interest that might bias the content or publication of
this report. The conflict of interest is…
Receipt of compensation:
Compensation of the author(s) of this report is not based on investment banking revenue.
Position as a officer or director:
The author(s), or a member of their household, does serves as an officer, director or advisory board member of the subject company.
Market making:
The author(s) does not act as a market maker in the subject company‟s securities.
Ratings key:
Banks rate companies as either a BUY, HOLD or SELL. A BUY rating is given when the security is expected to deliver absolute returns of 15% or greater
over the next twelve month period, and recommends that investors take a position above the security‟s weight in the S&P 500, or any other relevant index. A SELL rating is given when the security is expected to deliver negative returns over the next twelve months, while a HOLD rating implies flat returns over
the next twelve months.
Disclaimer:
The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but
the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. The information is not intended to be
used as the basis of any investment decisions by any person or entity. This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report should not be considered to be a recommendation by any individual affiliated with NYU-Poly
or the NYU-Poly Equity Research Report Competition with regard to this company‟s stock.